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March 24, 2010

Losing their net worth…and then some

Haiti’s Credit Unions Face Challenges Beyond Rebuilding

Staff members and workers dig through the wreckage of KOTELAM's Magoire Ambrose branch office in Port-au-Prince following the Jan. 12 earthquake. The building was completely destroyed.

PÉTIONVILLE, Haiti — Officials at La Fédération des Caisses Populaires
Le Levier, an
organization serving 50 caisses populaires, or credit unions, throughout Haiti, has reported that nine of its member institutions were seriously damaged in the Jan. 12 earthquake and three were destroyed, including KOTELAM, which was reduced to rubble. But the remaining institutions, many located in rural areas, face even greater challenges in the coming months.

Many of Haiti's 120 credit unions survived the earthquake with minimal damage, but that's not necessarily the case for their members. In fact, members who died or have faced a complete loss of personal assets could undermine the financial wellbeing of their credit unions. Increasing loan defaults could lead to the financial collapse of some credit unions, many of which are struggling to restore their own operations.

"Haiti's credit unions are already facing physical challenges that include structural damage, logistics and computer connectivity," said Greta Greathouse, chief of party for the Haiti Integrated Financing for Value Chains and Enterprises (HIFIVE) program administered in Haiti by World Council of Credit Unions (WOCCU). "But many of them will soon be facing grave issues regarding their capital position."

Most credit unions in Haiti are self-funded, with members' savings as the only source of capital on their balance sheets. Members whose homes were destroyed, assets lost and family members killed in the earthquake no longer have the means to repay their loans, with each default driving the credit unions closer to financial ruin.

"If members can't repay their loans, credit unions could lose all of their net worth...and then some," said Greathouse.

HIFIVE, a three-year, US$34.4 million multi-partner program funded by the U.S. Agency for International Development through the Academy for Educational Development and administered by WOCCU, is designed to strengthen enterprise development and promote job creation in rural Haiti. HIFIVE is working with the financial sector to bring savings, credit and remittance-linked products to underserved areas of the country and provide technical training to micro-, small and medium-sized enterprises.

WOCCU's Haiti office is currently undergoing its own logistical challenges, operating out of temporary space in two separate locations, one on the veranda of an apartment building and other inside Gallerie Expressions, an art gallery in the Port-au-Prince suburb of Pétionville. Permanent office space has been rented, but will require significant refurbishing before it can be made functional.

"We hope to be in the new space in a few weeks, but then we had hoped to be in March 1," Greathouse said.

Meanwhile logistical connectivity issues continue to challenge daily operations and escalating prices have caused additional hardship for the staff, most of whom live in tents near the sites of their current or former homes. WOCCU staff stability will continue to be critical in the program's efforts to help the country's credit unions, she adds.

"If employees have a house or tent, chances are they have between five and 20 relatives living with them," Greathouse said. "With prices climbing since the earthquake, our budget has been challenged and it's become that much harder for staff to care for family members' needs."

Haiti's credit unions are also strapped for critical resources and face similar challenges. Regulators at the Central Bank of Haiti have already earmarked 15 struggling caisses for closure, a number that could climb to as high as 50 of the country's approximately 220 financial cooperatives. Any type of assistance judicially administered could help the struggling movement continue serving members, according to Evans Jerome, the Central Bank's assistant director.

"Before the earthquake, many of [the credit unions] needed help," Jerome said. "Now they will appreciate that help even more."

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 57,000 credit unions in 103 countries serve 208 million people. Learn more about World Council's impact around the world at www.woccu.org.

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Contact: Rebecca CarpenterOrganization: World Council of Credit UnionsE-mail: rcarpenter@woccu.orgPhone: +1-608-395-2031